Subanchor: Pork prices as econimic indicator

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For more on the inflation news and public reactions to that, we have our reporter Yin Hang in the studio.

Q1. Yin Hang, it seems that the December CPI figures have provoked some different voices?

A: Exactly.Both pessimists and optimists found something to talk about in the inflation number of last month. The headline number; a CPI rise of 4.1 per cent year-on-year; was just enough to show overall inflation is still FALLING in China. But the details could be seen as reason for further caution. First the bull’s case. Inflation is still DROPPING. At 4.1 percent, the December print is only a squeak above consensus, and still represents a decline from November’s 4.2 per cent. What’s more, input pressure kept falling too. The year-on-year increase of 1.7 percent in PPI was the lowest since December 2009. Many experts believe the latest data will herald fresh easing. But there’s an alternative view. While inflation fell, it didn’t fall by much. Why? Because food prices started going UP again. In fact, month-on-month, food prices went UP 1.7 per cent, the first monthly increase since July (when inflation hit 6.5 per cent).

Q2. While, in terms of the hovering food prices, we’ve noticed that the price of pork still remain high ?

A: You’re right. According to a Reuters news report, the price of pork in China could soon rival U.S. payrolls as the world’s most watched economic indicator. International investors are increasingly focusing on domestic demand in the world’s second-largest economy as their key measure of global economic health.And there are FEW BETTER ways to gauge that demand than by tracking staple food prices that directly hit discretionary consumer spending -- a sector of economic activity that typically generates 40 percent of China’s annual GDP growth. Spikes in pork prices have constantly driven up Chinese inflation. Though pork only accounts for 3 percent of China’s consumer price index, it is the most popular meat in the country and its price has a big impact on the public’s inflationary expectations. Since for ordinary Chinese residents, the most direct impact of inflation on their lives is the affordability of everyday necessities, I’m sure the government will adopt some measures to ensure sufficient supply of pork to meet the surging demand during the Spring Festival.

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